The Supreme Court dealt a blow to President Obama’s environmental agenda Monday, breaking the Environmental Protection Agency’s winning streak at the high court in a move that could lead to future restrictions on President Obama’s attempts to combat climate change.
Justice Antonin Scalia, writing for the court in a 5-4 decision, sided with industry groups and 20 states that sued the EPA that the agency wrongly interpreted the Clean Air Act in issuing a rule to curb mercury and other toxic emissions from power plants. The court ruled that the EPA incorrectly believed that the statute’s silence on whether the agency must determine the cost of a regulation before issuing it meant it didn’t have to figure out its expense.
The ruling signaled that the court thought the EPA had overstepped its authority regarding its interpretation of the Clean Air Act, argued Andrew Grossman, an associate at Baker Hostetler. He said that was important because the agency’s detractors have claimed the EPA is taking too broad a view of Clean Air Act language in its proposed carbon emissions rule for power plants, called the Clean Power Plan. He called the ruling a “speed bump” that should give states pause about the carbon rule, which is the centerpiece of Obama’s climate plan.
“If you look at it in a big picture view, this is yet another very damaging defeat for the administration under the Clean Air Act,” Grossman told the Washington Examiner.
The case was sent back to a lower court. It is possible the EPA will have to start from scratch with a full rewrite, which it wouldn’t be able to finish by the time Obama leaves office. A possibility exists, however, that the agency won’t have to go back to square one.
The practical effect of axing the rule is limited. That’s because most power plants already have complied with the regulation, which had a compliance deadline of April, though about 10 percent of affected generators have applied for a one-year extension. A number of other generators have been shut down, but are unlikely to be revived in the wake of the ruling.
Senate Majority Leader Mitch McConnell, R-Ky., said the mercury ruling validated his pitch to states to avoid complying with the carbon rule because he thinks the EPA is on shaky legal ground.
“While much of the damage of this regulation has already been done, the ruling serves as a critical reminder to every governor contemplating the administration’s demands to impose more regressive – and likely illegal – regulations that promise even more middle-class pain. Clearly, there is no reason to subject their states to such unnecessary pain before the courts have even had a chance to weigh in, especially if the Supreme Court simply ends up tossing the regulation out as we saw today,” he said.
The EPA, however, noted the court decision — it remanded the cast to the U.S. Court of Appeals for the District of Columbia Circuit — didn’t reject the EPA’s ability to regulate emissions.
“EPA is disappointed that the court did not uphold the rule, but this rule was issued more than three years ago, investments have been made and most plants are already well on their way to compliance,” EPA spokeswoman Melissa Harrison said. “The decision was about how and when the agency considered costs … and not EPA’s Clean Air Act authority to limit hazardous air pollutants.”
To that end, William Yeatman, a senior fellow with the conservative Competitive Enterprise Institute, which opposes both the carbon and mercury standards, wasn’t so sure the Monday decision had much bearing on the eventual outcome for the carbon case. He called the ruling a “run-of-the-mill judicial review, rather than the enunciation of big new principles.”
That is partially because the language of the Clean Air Act section the high court said the EPA violated on the mercury rule has no equivalent in the section under which the agency crafted its carbon rule.
“This was a pretty narrow decision. This wasn’t about EPA’s regulatory authority,” Paul Bledsoe, a climate aide under former President Bill Clinton and president of consulting firm Bledsoe and Associates, told the Examiner. “Essentially this is a bump in the road rather than a change in climate policy direction.”
The legal fight about the Clean Power Plan, however, is over the term “best system of emission reduction” in the Clean Air Act.
The agency thinks that the term means the entire infrastructure that delivers electricity, from generators to customers. The EPA said that allows it to order emissions cuts through improving power plant efficiency, switching from coal to natural gas, adding renewable power and boosting customer energy efficiency.
But opponents say a system refers only to individual smokestacks. That would, at best, leave the EPA with the ability to ask for emissions reductions only through improving power plant efficiency and running more natural gas instead of coal.
“I think the commonality here is that you have these very aggressive, results-driven interpretations of the statute that may be too significant for the court to swallow,” Grossman said.
But some lawyers said it was the King v. Burwell case on Thursday — not mercury — that upheld subsidies underpinning Obamacare that held the greatest implication for the carbon rule.
Yeatman said the court applied a new interpretation to a landmark case — Chevron v. Natural Resources Defense Council — that gave agencies deference to interpret statutes when they’re vague. The court in King v. Burwell rejected the Internal Revenue Service’s suggestion that it be afforded such freedom of interpretation because its actions posed a “political and economic question” in an area where the agency lacked expertise.
Opponents of the EPA carbon rule have suggested that the agency is wading too deeply into state electricity planning and grid operations, which is the purview of the Federal Energy Regulatory Commission. Yeatman said the caveat in King v. Burwell could give ammunition to those seeking to block the rule.
“The rule, moreover, plainly presents an important economic or political question, for which the agency has no expertise (Congress created FERC to house such expertise). It follows that EPA’s Chevron claims run counter to the reasoning in King. This undercuts the agency’s legal reasoning,” he said in an email.
Industry lawyers are likely to use that plea when the carbon rule has its day in the Supreme Court, as appears likely. Scott Segal, an attorney who represents electric utilities for Bracewell & Giuliani, alluded to those points in a statement regarding the mercury decision.
“The court reminded the agency of the unique position the power sector plays due to its current level of regulation and its importance to the economy as a whole. These considerations should serve as important warnings to consider cost and reliability in a thorough manner before it finalizes its carbon rules. Failure to do so will place legacy before legality,” Segal said.
Still, the chances of that argument succeeding is dubious, said Brian Potts, a partner with Foley & Lardner LLP.
“Some have argued that that is also a point to EPA, that it has significant economic and political implications so if Congress wanted you to do this they would have passed a law,” Potts told the Examiner. “I’m skeptical that that was the court meant … but it’s certainly something the D.C. Circuit might listen to.”
Potts suggested the energy industry’s mercury win could scuttle its chance of defeating the Clean Power Plan on another legal reasoning.
At issue is a legal argument states and coal companies made in a challenge to the proposed carbon rule. They argued the EPA couldn’t regulate carbon emissions under section 111d of the Clean Air Act because the agency was already regulating power plants through section 112 with the mercury rule. The D.C. Circuit Court of Appeals rejected the case because the rule isn’t final — that’s coming this summer — but didn’t weigh on the merits of the argument. Nixing the mercury rule would therefore remove a major argument for carbon rule critics.
“This whole thing is going to put EPA in a really odd position at the” Court of Appeals, Potts told the Examiner. “They also know that the mercury rule poses a significant obstacle to the Clean Power Plan.”
So the EPA might be caught hoping that the lower court vacates the rule, Potts said. Some power plants that have bought mercury control technology might not use them because doing so would cost money. But the agency in a couple years could quickly calculate how much the mercury standard would cost and then propose it if and when the carbon rule survives a legal challenge.
“Bottom line is this was a big loss for EPA on the mercury rule but possibly a win for the EPA on climate change, and vice versa for industry,” Potts said.
